North Carolina couples who are getting a divorce can avoid some common financial mistakes. One of those may be keeping the home in exchange for a more liquid asset of equal value. In looking at the value, people may fail to account for the cost of maintaining the home. Accounting for this means the house might actually be worth less than the retirement account or other liquid asset for which it was exchanged. Furthermore, many people may struggle after a divorce to maintain the family home on a single income.
Another common mistake can be keeping a 401(k) while the other spouse takes an asset of equal value such as a checking account. A withdrawal from the 401(k) will incur a tax while taking money out of the checking account will not. However, if the couple decides instead to divide the 401(k), they will need a qualified domestic relations order. This allows a withdrawal to be made from the 401(k) without a penalty. However, the withdrawal must then be rolled into an individual retirement account within a specified time period.
One other common error is for the recipient of spousal or child support to not take out a life insurance policy on the payer. This insurance can protect the income in case of the payer’s death.
When couples negotiate property division, they may make some decisions that are not entirely financially based. For example, one parent might decide to keep the home despite the financial strain it might create because it helps provide more stability for the children. This can be a sound reason, but the parent should make sure that property is divided in a way that it does not mean losing out on other assets. People may want to discuss their goals for the divorce settlement with their attorneys before negotiations begin.